I'm the coauthor of The New Killer Apps: How Large Companies Can Out-Innovate Start-Ups. I’m also the coauthor of Unleashing the Killer App: Digital Strategies for Market Dominance (Harvard Business School Press, 1998) and Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years (Portfolio, 2008).
I cofounded and am the managing director of the Devil’s Advocate Group, a consultancy that helps business leaders design and stress test their innovation strategies.
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Much of the reporting about Google’s driverless car has mistakenly focused on its science-fiction feel. While the car is certainly cool—just watch the video below about a 95%-blind man running errands—the gee-whiz focus suggests that it is just a high-tech dalliance by a couple of brash young multibillionaires, Google founders Larry Page and Sergey Brin.

In fact, the driverless car has broad implications for society, for the economy and for individual businesses. Just in the U.S., the car puts up for grab some $2 trillion a year in revenueand even more market cap. It creates business opportunities that dwarf Google’s current search-based business and unleashes existential challenges to market leaders across numerous industries, including car makers, auto insurers, energy companies and others that share in car-related revenue.

Because people consistently underestimate the implications of a change in technology—are you listening, Kodak, Blockbuster, Borders, Sears, etc.?—and because many industries face the kind of disruption that may beset the auto industry, I’m going to do a series of blogs on the ripple effects that the driverless car may create. I’m hoping both to dramatize the effects of a disruptive technology and to illustrate how to think about the dangers and the opportunities that one creates.

In this installment, I’ll start the series with a broad-brush look at the far-reaching changes that could occur from the driver’s standpoint. In the next installment, I’ll show just how far the ripples will reach for companies—not just car makers, but insurers, hospitals, parking lot operators and even governments and utilities. (Fines drop when every car obeys the law, and roads don’t need to be lit if cars can see in the dark).

After that, I’ll explore how real the prospects are for driverless cars. (Hint: The issue is when, not if—and when is sooner than you think.) In the last three installments, I’ll go into the strategic implications for Google, for car makers and, finally, for every company thinking about innovation in these fast-moving times.

To begin:

Driverless car technology has the very real potential to save millions from death and injury and eliminate hundreds of billions of dollars of costs. Google’s claims for the car, as described by Sebastian Thrun, its lead developer, are:

We can reduce traffic accidents by 90%.

We can reduce wasted commute time and energy by 90%.

We can reduce the number of cars by 90%.

To put those claims in context:

About 5.5 million motor vehicle accidents occurred in 2009 in the U.S., involving 9.5 million vehicles. These accidents killed 33,808 people and injured more than 2.2 million others, 240,000 of whom had to be hospitalized.

Adding up all costs related to accidents—including medical costs, property damage, loss of productivity, legal costs, travel delays and pain and lost quality of life—the American Automobile Association studied crash data in the 99 largest U.S. urban areas and estimated the total costs to be $299.5 billion. Adjusting those numbers to cover the entire country suggests annual costs of about $450 billion.

Now take 90% off these numbers. Google is claiming its car could save almost 30,000 lives each year on U.S. highways and prevent nearly 2 million additional injuries. Google claims it can reduce accident-related expenses by at least $400 billion a year in the U.S. Even if Google is way off—and I don’t believe it is—the improvement in safety will be startling.

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The true essence of innovation in technology aims to A) Reach More Masses B) Give safer alternatives to old systems, and C) Assist in efficiency of time. The autonomous car Google has taken part in creating deals with all three of these points. It is refreshing to see that Google is putting both their money and man-hours behind the development of this product that could possibly one day become a pivotal aspect of our family’s lives.

What is so fascinating with this product (just as the video shows) is that it will enable more people to be able to get from point A to point B without the need of assistance. That being said the question could arise that with more people accessing this piece of technology would the streets be more crowded? I think not, because when these cars are being used the human error factor is taken out of the driving equation. Which in my opinion, will create a smoother flow of traffic with fewer accidents. This brings me to my next point in stating that this new piece of technology is a safer alternative to an old system just as I mentioned in point B above. As you look at the progression of the automobile over the past 100 years the main goal above all else is the safety of the passengers. One of the key points that you learn in drivers ed is to expect the unexpected and drive on the defensive. Google’s product enables you to be confident that human error will not be involved, therefore increasing your safety while driving. Another point of positivity in regards to this new technology is the ability to assist the users by making the user’s time spent while driving more efficient. No longer would we have to focus on the road while trying to multi-task by reading emails or talk on the phone. In this research article by the University of Utah http://www.science20.com/news_articles/multitasking_while_driving_you_still_stink_it-101688 you are given different percentage break downs on how much we do multi task while driving and how each time we multi-task while driving our safety is in jeopardy.

There are so many questions this product brings up, such as what will happen to the taxi industry? Will this product be affordable to the masses? Will other car companies purchase this technology or will Google rule the auto industry? Fantastic first post Chunka, I can’t wait to read your next post!

Also, if any of you would like to read an article on how this could effect our economy check this one out http://www.guardian.co.uk/technology/2012/sep/30/google-self-driving-car-unemployment?oo=0 this article talks a great deal about how the use of an automated car will render a lot of human jobs as worthless, thus leading to the “next wave of unemployment.”

I like this because of the efficiencies. I am the consumate hypermiler. I drive a Nissan LEAF, and being electric, it allows me to maximize efficiency. On my 28 mile commute, round trip, I use about 5 kWh and I generate that from sunlight falling on my roof. I have perfected my driving technique to eliminate almost all waste.

What I realized after learning of these self-driving cars is that this is how they will be programmed to drive. Efficient driving is also safe driving. Given that efficiency and safety are the two most important aspects of driving, it’s natural to imagine that’s how these will be programmed.

Fewer crashes will further increase the efficiency of thousands of other commuters since they won’t have to stop for the crashes.

Cars with the same system can inter connect and make all or part of the road together at a higher speed and safety. You can have a contract that allow you the car for a price according the number of km you take. You can call it half an hour before you take it. You can share it or not according the contract. You don’t have the burning to make maintenance. In case of problems you just leave it and call another one. It avoid all accidents due to twitting. I just see a fantastic opportunity given to our society. I just hope it comes as fast as possible to sell my car and be free to read or wright and prepare my day work on my office way.

Errr. wrong. Very wrong. It will be many, many decades if it ever happens. It’s much, much harder than you think and a carefully prepped demo doing the real easy stuff is no indication of rapid progress.

Chunka good article, I am still confused though, how is the driverless car going to be valued “$2 trillion a year in revenue” ?Also do you have any ideas of how, this will effect DUI’S? Has there been any talk about that yet?

The societal value, I believe, will measure in the trillions. The auto-related revenue in the US alone is about $2T. Not all of that will accrue to the makers/owners of the driverless car but most of it will be thrown up for grabs by the fundamental reconceptualization of the car enabled by driverless technology.

DUI’s? Depends on whether there will be laws against drinking while riding. For a long time, the rules will probably be like those for airplane pilots, who are mostly not needed but still required—and not allowed to be intoxicated.